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13-09-2020, 08:48 PM
(This post was last modified: 13-09-2020, 08:50 PM by Curiousparty.)
With a mere current market cap of only $934mil ($0.22 per share), Oxley is going to recognize an estimated $2.2 billion worth of revenue (already secured) over the next 3 years, more than 2 times its current market cap.
Has Mr Market undervalued Oxley too much because of its gearing concern?
Oxley is trading at 58% discount to RNAV of $0.52
Why Oxley is good for the next few years?
• Due to the construction delays for its projects in Singapore, Ireland, and Malaysia, as well as the deferred start of new construction sites, some of the earning for FY2020 has been deferred to FY2021 and FY2022. Hence, FY2021 (and to some extent FY2022) should see a bumper harvest in EPS. UOB analysts have raised their net profit estimates for FY21-22 by 27% and 28% respectively. UOB analysts expected EPS of 9 cents for FY2021, EPS of 4.1 cents for FY2022, and EPS of 5.1 cents for FY2023. Assuming a dividend payout ratio of 50%, expect a dividend bonanza for next 3 years.
• There will be bound to be project delays given the current situation, but Oxley is in good shape to ride out COV19 recession. There should be sufficient liquidity to cover all non-rollover maturing debts when they come due. For upcoming 2021, Oxley only needs to clear $480mil bond, which is more than sufficiently covered by earmarked proceeds from existing projects. Only corporate debts and bonds need to be paid at maturity. Project loans are only due when projects are completed and are repaid with project sales proceeds, while investment property loans are refinanced on a recurring basis.
• Oxley has additional financing avenues if needed, and is in the process of divesting non-core assets with a renewed focus on development projects. Some funding sources can be secured through (i) the group’s unbilled revenues (S$2.4bn from Singapore projects), and (ii) unencumbered hotels in Cambodia (indicative valuation S$150mn as of Feb 2020). Management is also looking to divest a land parcel in Cambodia (c.US$50m), Walker Street in Australia for S$90m (net of loans) and its 10% Aspen stake, pending group’s cash-flow situation.
• Real estate development fund. This is slated to be the next game plan for Oxley. Setting up a real estate development fund to scour for opportunities in developed, transparent markets. This is really moving up the value chain of development activities. Rather than to be encumbered by the capital-intensive nature of land development and construction cost, the risk involved is much lower because it does not stretch the balance sheet as much.
Has Mr Market undervalued Oxley too much because of its gearing concern?
Oxley is trading at 58% discount to RNAV of $0.52
Why Oxley is good for the next few years?
• Due to the construction delays for its projects in Singapore, Ireland, and Malaysia, as well as the deferred start of new construction sites, some of the earning for FY2020 has been deferred to FY2021 and FY2022. Hence, FY2021 (and to some extent FY2022) should see a bumper harvest in EPS. UOB analysts have raised their net profit estimates for FY21-22 by 27% and 28% respectively. UOB analysts expected EPS of 9 cents for FY2021, EPS of 4.1 cents for FY2022, and EPS of 5.1 cents for FY2023. Assuming a dividend payout ratio of 50%, expect a dividend bonanza for next 3 years.
• There will be bound to be project delays given the current situation, but Oxley is in good shape to ride out COV19 recession. There should be sufficient liquidity to cover all non-rollover maturing debts when they come due. For upcoming 2021, Oxley only needs to clear $480mil bond, which is more than sufficiently covered by earmarked proceeds from existing projects. Only corporate debts and bonds need to be paid at maturity. Project loans are only due when projects are completed and are repaid with project sales proceeds, while investment property loans are refinanced on a recurring basis.
• Oxley has additional financing avenues if needed, and is in the process of divesting non-core assets with a renewed focus on development projects. Some funding sources can be secured through (i) the group’s unbilled revenues (S$2.4bn from Singapore projects), and (ii) unencumbered hotels in Cambodia (indicative valuation S$150mn as of Feb 2020). Management is also looking to divest a land parcel in Cambodia (c.US$50m), Walker Street in Australia for S$90m (net of loans) and its 10% Aspen stake, pending group’s cash-flow situation.
• Real estate development fund. This is slated to be the next game plan for Oxley. Setting up a real estate development fund to scour for opportunities in developed, transparent markets. This is really moving up the value chain of development activities. Rather than to be encumbered by the capital-intensive nature of land development and construction cost, the risk involved is much lower because it does not stretch the balance sheet as much.
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